Storage and warehousing and GTA service tax liability for food grains: exemptions applied, tax demands set aside, interest upheld.

Storage and warehousing service excludes storage of agricultural produce, so storage of food grains does not attract service tax and the demand under that category is unsustainable and set aside. Where consignors/consignees (falling within the beneficiary categories) are contractually liable to pay freight, the appellant is not liable for service tax as a goods transport agency and that GTA demand is set aside. The confirmation of interest was not contested by the appellant and is therefore upheld. Appeal disposed on those terms.

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Issues: (i) Whether the demand of service tax confirmed under the category of 'storage and warehousing service' in respect of storage of food grains is sustainable; (ii) Whether the demand of service tax confirmed under the category of 'GTA service' against the appellant is sustainable when consignor/consignee (FCI, IFFCO etc.) paid the freight.

Issue (i): Whether storage of food grains by the appellant attracts service tax under 'storage and warehousing service'.

Analysis: The definition of 'storage and warehousing' under Section 65(102) of the Finance Act, 1994 expressly excludes any service provided for storage of agricultural produce. The appellant stored food grains, which are agricultural produce, and the exclusion therefore directly applies to the services rendered by the appellant.

Conclusion: The demand of service tax of Rs.1,33,96,302/- under 'storage and warehousing service' is not sustainable and is set aside in favour of the assessee.

Issue (ii): Whether the appellant is liable to pay service tax under 'GTA service' where consignor/consignee fall within the categories listed in Rule 2(1)(d)(v) and pay the freight.

Analysis: Rule 2(1)(d)(v) of the Service Tax Rules, 1994 specifies that in relation to taxable service provided by a goods transport agency, where the consignor or consignee is one of the listed categories and pays the freight, that consignor or consignee is the person liable for paying service tax. The record shows consignors/consignees such as FCI and IFFCO paid the freight and fall within the listed categories; the contractual terms assign transport handling charges to depositors/consignees.

Conclusion: The demand of service tax of Rs.5,26,88,909/- under 'GTA service' is not sustainable and is set aside in favour of the assessee.

Final Conclusion: The appeals are partly allowed insofar as the confirmed service tax demands under 'storage and warehousing service' and 'GTA service' are set aside; the confirmation of interest of Rs.2,06,712/- is upheld.

Ratio Decidendi: Storage of agricultural produce is excluded from 'storage and warehousing service' under Section 65(102) of the Finance Act, 1994, and under Rule 2(1)(d)(v) of the Service Tax Rules, 1994 the consignor or consignee who pays freight and falls within the specified categories is the person liable to pay service tax for GTA services.

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